Optimizing Cost and Capital

Many times an organization will cut costs by a certain percentage across the entire organization as a way of demonstrating fairness. This approach is not effective generating energy and momentum for a turnaround. A focus on costs without a clear vision of desired results simply leads to more cost-cutting and frustration.

We help our clients optimize their cost and capital structure by viewing cost as it is linked to the overall strategy and outcomes. The usual result is that organizations will increase investment in some areas and decrease investment in others. Generally, only a few areas of business life generate the most revenue. The key is identifying these areas in an intentional way.

Our strategy looks at two categories of cost:

Problem of Fixed Costs – when fixed cost levels are high, it is harder for an organization to reach a break-even point

Solution: We identify the optimum level of fixed cost in the context of your strategic plan and organizational structure. We also identify and maximize the value of your hidden assets such as real estate, rights-of-way, and intellectual capital

Problem of Working Capital – each working capital component (inventory, accounts payable and receivable) is usually considered independently and measured only at fixed points in time.

Solution: We develop a more effective working capital strategy based on the concept of an integrated vision of your cash conversion cycle with ongoing metrics and adjustments. This approach results in a real-time optimization of working capital levels.

Benefits

Approach

Would you like to optimize costs and capital in your organization? Let’s Talk